I'm not sure if I calculated the final window dressing day for orders to be in considering the T+3 (Transaction plus 3-days) settlement rule, considering the half days here and there, however I'd say I'm 98% sure today is the last day for window dressing as today's equity settlement falls on December 31'st (next Tuesday) in which the market is open, the following day (New Year's day) the market is closed, so I think that is all correct.
Window Dressing is always a big event at quarter's end, even at month's end as many funds report monthly on performance now. However at quarter and year's end, Window Dressing is taken to a new art, the "Art of Looking Smart".
In any case with the IWM breaking this week's intraday character, I thought there were a couple of interesting things like HYG, the market arbitrage asset used all week, but at the same time seeing distribution all week to the point in which I said 2-3 times Monday/Tuesday "I'd like to short it", but the beta is just too low for me.
HYG stands out today.
I described the strength in the averages as "Skin Deep", the IWM is the perfect example, take a look as of today.
Near perfect confirmation in the IWM 1 min intraday chart, it went negative Tuesday afternoon and continued this morning.
Just a little deeper and stronger underlying flows, this 3 min chart is much different, this is why I said it seems market makers/specialists are guiding trade this week and it has to do with filling orders for Window Dressing.
QQQ 1 min intraday losing its luster, note the options price pin the day before quad witching and that area just exceeded, Max Pain.
Yet just beyond at the 2 min chart a darker picture emerges.
SPY 1 min, I never said this was the leader, but it's strength here is relative to what is below...
2 min, note the op-ex Max Pain pin and the pop just above a 5-week range and underlying trade since.
I said all this week, HYG is being used to prop prices up in an algo arbitrage scheme, but it's very weak in underlying trade, this is the same concept as the IWM and other averages.
Look at the drop today, we would have been right to short it or buy puts.
The 15 min chart was telling the tale with highest probabilities long before anyone knew it would fall today.
Despite whatever else you might glean from the action above, the reaction in credit is one thing you should not dismiss and should give that the weight and respect it deserves, Credit markets are far better informed than equity markets, thus the phrase, "Credit leads, equities follow".
Even though I'm not crazy about the Beta, in retrospect I should have opened a short duration put option this week.
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